National Council of Applied Economic Research
Five investor education workshops with financial regulators
NCAER’s newly established Investor Education and Protection Fund (IEPF) Chair Unit’s hosted the third of the series of five workshops on Investor Education and Protection. This workshop, focusing on the National Pension System was held virtually.
India’s 2014 Pradhan Mantri Jan Dhan Yojana programme helped create robust digital financial services, increasing the proportion of those above the age of 15 with a bank account to nearly 80% in 2017, compared to just about 35% in 2011. Digitization has brought banking to many more during the pandemic. The National Strategy for Financial Education 2020-25 recognizes the unique challenges of creating a financially aware and empowered India, and the need for convergence of efforts by multiple stakeholders that regulate and manage India’s financial resources.
Even as half of India’s population is under the age of 60, population projections suggest that by 2050, one in five Indians will be over the age of 60, as compared to the current figure of one in 12 (Financial security for India’s elderly, CRISIL 2017). This means that India’s transition from a largely young country to an ageing one must be supported by a robust pension system which provides for its elderly.
The current pension system in India is fragmented, with multiple schemes for the working and retired population—some of which are regulated by the Pension Fund Regulatory Development Authority (PFRDA). Of these, two schemes are of particular importance, namely the National Pension System and the Atal Pension Yojana. As of November 2020, the combination of these schemes covers over 38 million subscribers. Both these schemes require pensioners to decide the proportion of their income they wish to invest and how, as well as choose a Pension Fund Manager in select cases, a difficult decision that impacts the returns on retirement. This means that pensioners must be able to foresee their requirements 40 years in the future and decide upon a pension that would be sufficient for retirement. This kind of foresight requires specific investor education strategies to help them realize the full potential of their investments.
The third NCAER workshop in its investor education and protection series focused on the National Strategy’s operations in the Indian National Pension System. This workshop featured insights from from leading experts as well as new pension systems regulator PFRDA. Supratim Bandyopadhyay, Chairperson, PFRDA, delivered the keynote address and the workshop was chaired by Deepak Mohanty, Whole -Time Member (Economics), PFRDA. Madnesh Kumar Mishra, Joint Secretary (Pension), Department of Financial Services at the Ministry of Finance outlined the government’s perspective on the subject.
The NCAER workshop series was inaugurated on December 16, 2020 with a keynote address by RBI Governor Shaktikanta Das, followed by the first workshop on the securities market. This series of five NCAER workshops covers investor education issues in securities market, insurance, pension funds and credit markets. These workshops with key regulators are an opportunity for participants to both learn from key regulators about their strategies for investor education and to contribute to refining the priorities for action and for creating relevant further research and knowledge base in this area.